Can a Maryland second-mortgage lender charge the borrower for a title examination on top of a title insurance premium?

Plain-English summary

A state senator asked the Attorney General three questions about title-related fees on secondary mortgage loans (second deeds of trust) under §12-410 of the Commercial Law Article: whether a lender could charge a borrower for a title examination in addition to a title insurance premium when the lender arranged the title insurance at the borrower's request; whether it mattered if the lender's own general counsel furnished that title insurance on the borrower's behalf; and whether a lender could charge for a title examination tied to an attorney's certification of title used instead of title insurance. The opinion, largely deferring to a 1967 AG opinion interpreting the same statute, concluded a lender could pass along the title examination cost as part of the cost of title insurance, that a savings and loan association's use of its own general counsel to arrange the insurance did not change that answer because savings and loan associations are exempt from the location-restriction statute the senator asked about, but that a lender could not charge for a title examination connected to an attorney's certification of title, since the statute only authorized charging for insurance costs, not attorney certification costs.

Currency note

This opinion was issued in 1982. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The opinion construed §12-410 of the Commercial Law Article and related secondary mortgage loan provisions as they existed in 1982, and expressly deferred to a 1967 AG opinion's reading of the same statutory language on stare-decisis-like grounds specific to long-unchanged statutes. Maryland's secondary mortgage loan law, its title insurance regulation, and its consumer lending statutes have all had decades to change since 1982. Anyone researching what fees can be charged in connection with title insurance or title certification on a Maryland mortgage today should verify the current version of these statutes rather than relying on this opinion's analysis.

Common questions

Could a Maryland second-mortgage lender in 1982 charge extra for a title exam if it arranged the borrower's title insurance?
Yes, according to this opinion. If the borrower authorized the lender to obtain the required title insurance policy, the lender could require the borrower to pay the title examination cost as part of the overall cost of that insurance.

Did it matter that the lender's own general counsel arranged the title insurance, rather than an outside company?
No, not for the type of lender described in the senator's question. The opinion found the location-restriction statute the senator asked about did not apply to savings and loan associations at all, since that type of lender was specifically exempted from that statute, so the identity of who arranged the insurance did not change the answer.

Could the lender charge for a title examination if it accepted an attorney's certification of title instead of title insurance?
No. The opinion concluded the secondary mortgage loan statute only authorized the lender to require payment of a title insurance cost, not a fee for an attorney's certification of title, since an attorney's certification is not technically "insurance" under the statute's terms.

Why did the opinion lean so heavily on a 1967 opinion instead of just reading the statute fresh?
The opinion explained that a 1967 interpretation of a statute that the General Assembly later reenacted without substantive change on the point in question is treated as having the General Assembly's implicit acquiescence, so even though the AG's office said it might not have drawn the same distinctions writing on a "clean slate," it deferred to the settled 1967 reading rather than disturbing 15 years of reliance on it.

Background and statutory framework

The senator's questions sought to clarify a 1967 AG opinion (52 Opinions of the Attorney General 27) construing the secondary mortgage loan law's title insurance provision, which had concluded that a lender may require a borrower to procure title insurance as a loan condition, and that if the borrower instead authorizes the lender to obtain that insurance, the cost of the insurance remains the borrower's responsibility. The opinion here read that 1967 conclusion's use of the phrase "cost of insurance" as implicitly including a title examination fee, since the 1967 opinion had explicitly said as much for the alternative situation where the borrower arranges his own title examination and attorney. Although the current opinion candidly noted that, on a "clean slate," it might not have drawn the same distinctions and might have concluded title examination charges could not be added to the title insurance premium at all, it deferred to the 1967 reading because the underlying statutory language had been reenacted without substantive change for 15 years, which under Maryland case law gives a longstanding contemporaneous agency construction the practical force of law.

On the senator's second question, the opinion found that §12-304(b)(2)(i) of the Financial Institutions Article, which restricts where a secondary mortgage loan licensee may take applications and conduct settlements, simply did not apply to the savings and loan association described in the inquiry, because that type of lender is specifically exempted from that section's coverage; the source of the title insurance (the lender's own general counsel acting as an agent for a title insurance company, versus an outside company) therefore made no difference to whether the borrower could be charged for the title examination.

On the third question, the opinion contrasted §12-410 (which governs secondary mortgage loans and only expressly allows charging for the cost of title insurance) with §12-307 of the Consumer Loan Law, which expressly permits charging a borrower for either title insurance premiums or reasonable attorney's fees for searching and insuring title. Because the General Assembly had not included similar language authorizing attorney's-fee charges in §12-410, the opinion concluded the omission was deliberate, and read the statute as permitting a lender to charge only for title insurance, not for the cost of an attorney's certification of title, even when the lender chose to accept that certification instead of a title insurance policy. The opinion further noted a certification charge could not be recast as an "insurance" charge either, since §12-410(c) limits qualifying insurance to policies obtained from a licensed insurance company at approved rates, which an attorney's certification is not.

Citations

Statutes:

• §12-410 of the Commercial Law Article
• §12-304(b)(2)(i) of the Financial Institutions Article
• §12-302(1) of the Financial Institutions Article
• CL §12-307
• CL §12-411
• CL §12-410(c)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1982/Volume67_1982.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

Credit Regulation—Secondary Mortgage Loan Law—Title Insurance—Title Examination Fees

July 15, 1982

The Honorable Laurence Levitan
Senate of Maryland

You have asked for our opinion on several questions relating to the application of §12-410 of the Commercial Law Article ("CL" Article). Your questions are directed to the following facts, as described in your letter: In securing a second deed of trust loan from a savings and loan association, the borrower requests the lender to make all the arrangements for the loan closing. The lender in turn arranges for a closing agent and, further, requires that the borrower furnish a title insurance policy to the lender. Under the facts you present, a title insurance policy would be issued only after an examination of the title.

You pose the following specific questions:

(1) If the borrower authorizes the lender to obtain the required title insurance policy for him, may the lender require the borrower to pay for the title examination cost in addition to the title insurance premium?

(2) In view of §12-304(b)(2)(i) of the Financial Institutions Article, would it affect the assessment of fees for examination of title if the savings and loan association arranged with its general counsel to furnish the title insurance on behalf of the borrower?

(3) When a lender is willing to accept an attorney's certification of title, rather than requiring title insurance, may the borrower be assessed charges for an examination of title incident to that certification?

For the reasons given below, we believe that the answers to your inquiries are as follows:

(1) If the lender arranges for title insurance at the borrower's request, the borrower may be required to pay the cost of the title examination as part of the cost of the title insurance.

(2) A lender may require the borrower to pay this cost, without violating §12-304(b)(2)(i) of the Financial Institutions Article, if its general counsel, as agent for a title insurance company, furnishes title insurance on the borrower's behalf.

(3) The lender may not require the borrower to pay the cost of a title examination incident to an attorney's certification of title, even if the lender chooses to accept such a certification in place of a title insurance policy.

I
Background

Your questions seek a clarification of a 1967 Opinion of the Attorney General, 52 Opinions of the Attorney General 27 (1967), in which the following conclusions were reached:

"What the law permits is that the lender may require, as a condition to making the loan, that a title insurance policy be procured by the borrower. If the issuance of a title policy requires a title examination, then the borrower must either (1) arrange for a title examination and pay any attorney's fees resulting therefrom directly to the attorney of his own choosing or (2) authorize the lender to obtain a title insurance policy for him. Should the borrower adopt the latter alternative, the cost of the insurance would remain the borrower's responsibility." Id. at 31.

In a more recent letter to you, we noted that, had we been writing on a "clean slate", we would have not drawn all of the same distinctions as those drawn in the 1967 Opinion, and, but for that Opinion, we would have concluded that title examination charges may not be charged to a borrower in addition to or in place of the title insurance premiums expressly permitted by CL §12-410. Nevertheless, we recognized that the distinctions made in the 1967 Opinion and the conclusions there reached were not unreasonable. Accordingly, we deferred to that Opinion as authority for the allowance of title examination fees in the circumstances there described. See Letter from Stephen H. Sachs, Attorney General, to Laurence Levitan, State Senator (January 28, 1980).1

1 As we explained in that letter, the 1967 Opinion was issued in the same year in which the Secondary Mortgage Loan Law was enacted by Chapter 390, Laws of Maryland 1967, some 15 years ago. The Court of Appeals has stated that a contemporaneous construction of the law of the State, not annulled by the General Assembly, "has the force of law". Popham v. Conservation Commission, 186 Md. 62, 71 (1946). Thus, for example, when a statute is reenacted without substantive modification during the years between a contemporaneous construction and the development of a controversy, the General Assembly "has impliedly acquiesced in the correctness of the construction placed on it by the Attorney General". Twinbrook Swimming Pool Corp. v. Comptroller of the Treasury, 274 Md. 88 (1975). In this context, we note that the statutory provisions discussed in the 1967 Opinion were subsequently repealed and recodified in 1975, without substantive change, as part of the Commercial Law Article.

II
Title Insurance Obtained by Lender

Your first question clearly addresses the second alternative situation described in the 1967 Opinion: that in which a title insurance policy is obtained by the lender at the borrower's request. You ask whether, in such a situation, the lender may require the borrower to pay for the title examination cost in addition to the title insurance premium.

Although the 1967 Opinion, in its discussion of this alternative situation, did not explicitly denote a title examination fee as being a "cost of the insurance", we believe that the rationale and language of that Opinion would allow a lender to require the borrower to pay for the cost of a title examination as part of the cost of the title insurance.

In summarizing the specific rule applicable to this situation, i.e., where the borrower authorizes the lender to obtain the insurance for the borrower, the Opinion concluded that "the cost of the insurance would remain the borrower's responsibility". 52 Opinions of the Attorney General 27, 31 (1967) (emphasis added). The phrase "would remain" evidently refers back to that which immediately precedes it: the Opinion's discussion of the first alternative situation in which the borrower must "arrange for a title examination and pay any attorney's fees resulting therefrom directly to the attorney of his own choosing". Id. With regard to this first alternative, the Opinion explicitly concluded that the borrower is responsible for all costs of insuring the title, including a title examination fee. By then using the phrase "the cost of insurance would remain the borrower's responsibility" in its discussion of the second alternative, the 1967 Opinion implicitly concluded that, in this latter situation as well, a fee for examination of title could likewise be charged to the borrower.

Therefore, under the circumstances you describe, and based on the 1967 Opinion, we conclude that a lender may require the borrower to pay for the title examination.

III
Title Insurance Furnished by Lender's Counsel

Your second question directs our attention to §12-304(b)(2)(i) of the Financial Institutions Article ("FI" Article) and asks if this section would affect the lender's right to charge a borrower for a title examination if the lender has "arranged with its general counsel to furnish the title insurance on behalf of the borrower".2

The provisions of FI §12-304(b)(2)(i), referred to in your question, restrict the locations at which a licensee under the secondary mortgage loan law may receive loan applications and conduct settlements. The lender you describe in your fact situation is a savings and loan association, a type of lender that, under FI §12-302(1), is specifically exempted from the coverage of FI §12-304.

Therefore, we must conclude that any prohibition contained in FI §12-304(b)(2)(i) would have no application to a savings and loan association.

2 Although you do not specify the relationship between the general counsel and the savings and loan association, we assume for the purposes of this Opinion that, when the general counsel furnishes the title insurance, he does so as an agent of a title insurance company.

IV
Attorney's Certification of Title

Your third question asks whether a lender, who is willing to accept an attorney's certification of title in place of title insurance, may charge a borrower for an examination of title incident to the certification.3

To require the borrower to pay this charge would, we feel, require the addition of language not found in the statute. This conclusion is supported by the General Assembly's specific allowance in the Consumer Loan Law, under CL §12-307, of charges for either "title insurance premiums" or "reasonable attorney's fees paid for searching and insuring the title to any real property securing a loan". Thus, CL §12-307, in sharp contrast to CL §12-410, expressly permits a consumer loan borrower to be charged for either title insurance or attorney's fees incident to insuring the title of real estate. Had the General Assembly intended the same result with respect to secondary mortgage loans, then, we believe, it would have expressly said so in §12-410, as it did in §12-307.4

We therefore conclude that CL §12-410 should be interpreted as only allowing the lender to require the borrower to pay the cost of title insurance, and not the costs of an attorney's certification of title.

3 You suggest in your letter that an attorney's certification of title might cost the borrower less than title insurance. This may not always be the case, however, especially when the first mortgage is already insured by a title company. Moreover, in some circumstances, the attorney's certification of title may provide a significantly lesser degree of protection to the borrower than a normal title policy.

4 We also note that CL §12-410 refers specifically to "insurance"; technically speaking, an attorney's certification is not "insurance". Therefore, the charge for such a certification would be prohibited under CL §12-411, which prohibits additional charges even if not retained by the lender. See 57 Opinions of the Attorney General 53 (1972). Moreover, even to the extent that an attorney's certification of title might be viewed as constituting a form of "insurance", CL §12-410(c) refers only to insurance that is obtained (1) from an insurance company qualified to do business in Maryland and (2) at rates not to exceed those approved by the Insurance Division of the Department of Licensing and Regulation.

V
Conclusion

In summary, based on the precedent of 52 Opinions of the Attorney General 27 (1967), we conclude that, in connection with a secondary mortgage loan: (1) a savings and loan association may require the borrower to pay the costs of a title examination incident to title insurance if the borrower has authorized the lender to secure the title insurance; but (2) a savings and loan association may not require a borrower to pay for a title examination incident to an attorney's certification of title.

Stephen H. Sachs, Attorney General
Robert deV. Frierson, Assistant Attorney General
Avery Aisenstark
Principal Counsel,
Opinions and Advice